India Cements Q2 Review - Volumes Grow On Low Base, But Profitability Under Pressure: Motilal Oswal

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Motilal Oswal Report

The India Cements Ltd.’s Q2 FY22 result was in line with our estimates, although earnings were under pressure due to higher costs.

The lower base of last year aided volume growth of 12% YoY; this was offset by a 13% YoY increase in opex/tonne, leading to a 49.2% YoY drop in blended Ebitda/tonne.

We maintain our FY23E/FY24E estimates on India Cements as valuations at 12 times/9.3 times FY23/FY24E enterprise value/Ebitda appear expensive.

Higher volatility in earnings due to the demand-supply mismatch in the South region and higher leverage (net debt/Ebitda at 4.5 times/3.6 times FY22/FY23E) in the absence of capex plans are the key concerns.

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